Financially-strapped airlines begin to work as team

WASHINGTON -- Government approval of a partnership between United Airlines and US Airways to sell seats on each other's flights could mean a similar agreement between Delta, Northwest and Continental airlines will get the go-ahead.

LESLIE MILLER

Published 12:00 am, Friday, October 4, 2002

The Transportation Department on Wednesday approved a code-sharing agreement by United and US Airways that will also allow them to coordinate schedules and offer reciprocal perks such as frequent flier miles, effective immediately.

Kristi Tucker, a Delta spokeswoman, said the decision indicated the Transportation Department is likely to approve the three-way proposal.

Delta has acknowledged the alliance proposed in August was partly a response to the US Airways-United partnership announced the month before.

The "code-share" term comes from the practice of putting an airline's two-letter industry code onto another's flights.

Small air carriers oppose the agreement, fearing the bigger airlines will be difficult to compete against because of their marketing clout and dominance of airport facilities.

"I would call it a virtual merger," said Ed Faberman, executive director of the Air Carrier Association of America, which represents smaller airlines. "There's no other industry that this would be permitted in."

Smaller airlines are also concerned the government will approve the Delta-Northwest-Continental alliance, giving the five airlines about 60 percent of the market, Faberman said. United and US Airways have about 20 percent, he said.

In its decision, the Transportation Department said it approved the partnership between the two financially troubled airlines because it would increase competition and benefit travelers.

"We have not yet seen evidence that the agreements will unreasonably restrict either airline's incentives and ability to compete independently or would be likely to result in collusion on fares or service levels," according to the decision.

The regulators said they would closely monitor the agreement and act against the airlines if they found the venture dampened competition.

Glenn Tilton, United's chief executive, said the decision was great news for the airline.

"Our customers will enjoy expanded service options and frequent-flier benefits, as well as access to each carrier's airport clubs," he said.

US Airways said on Wednesday that code-share flights will be phased in during the first three months of next year. The first tangible benefit will begin Oct. 14, when airport-club members can use both airlines' airport lounges.

The airlines also agreed to some restrictions to limit anticompetitive behavior and promised they would compete independently on fares and service.

The United-US Airways alliance is intended to bring in more revenue to the financially strapped companies by combining US Airways' strength in north-south flights on the East Coast with United's strength in cross-country flights.

US Airways, the nation's seventh-largest carrier, filed for bankruptcy Aug. 11 and has cut costs dramatically, eliminated hundreds of flights on unprofitable routes, expanded the use of smaller, cheaper regional jets and extracted wage concessions from its workers.

United, the No. 2 airline, has said it will also have to seek bankruptcy protection if it can't cut its labor costs.

Under the restrictions, the airlines cannot:

* Code-share on local traffic on routes where both offer nonstop service, such as Philadelphia-Los Angeles.

* Code-share on nonstop flights to the same destination from Dulles International Airport or Reagan Washington National Airport, except for flights between Washington, New York's LaGuardia Airport and Boston's Logan International Airport.